Anybody considering taking on a lease could do well to listen to Kalpana Varu’s story. By today’s date (24 March) she and her husband have to hand back the keys to their convenience business of 36 years.
Their lease finished last September and their lawyer got them a brief extension to protect their rights (this is called a hold-over and it means that the original conditions of the lease still apply). Meanwhile, they were hoping to sell the goodwill for about £160K and transfer the lease to a new tenant. But the landlord has said they could only have the same lease as before which meant that, if they sold it on to someone else, they would remain liable, as the head leaseholder, for any shortfalls in rent and any dilapidations.
Their solicitor said if they were selling to the likes of Tesco (or any big group) there wouldn’t be any need for these back-up guarantees.
“Tesco would be what is called a better covenant - not likely to go ‘pop’,” says Barry Frost, who runs Commercial Plus (Chester) and who calls himself “poacher turned gamekeeper” as he was previously a landlord before going into the property advice business. “It’s called an authorised guarantee and it’s in every lease,” says Barry. “Although most are never enforced. It’s all at the discretion of the landlord.”
The Varus’ landlord is a relative of the original landlord with whom they had a friendly relationship up until his death; but this one isn’t budging and has shot the rent up from £25K a year to £44K. (It’s likely, says Barry Frost, that rent reviews have been overlooked for years because of the good relationship between the tenants and the original landlord. In which case they could reflect on how cheap their rent was in the past.) In any case, the rent should reflect market value.
But the upshot is that the Varus are walking away from the business. “There’s no way we can benefit now. We’d rather have a peaceful life,” says Kalpana.
The lesson here is that you must get professional advice before you commit to something as binding as a lease. To be certain, consult someone like Barry Frost or a chartered surveyor with that 44-page lease, then go to your solicitor. Belt and braces.